What to Read While Hanging Out at the Fiscal Cliff

While you are waiting for Congress and President Obama to decide what they are going to do about the fiscal mess, here an idea: Pick up a copy of Taxes in America: What Everyone Needs to Know, (Oxford University Press, 2013) a valuable new primer on the nation’s wild and crazy revenue system by Len Burman and Joel Slemrod.

The authors are two of the nation’s top tax economists (and, full disclosure: both are long-time friends of mine). Len was a founder of the Tax Policy Center who now teaches at the Maxell School at Syracuse. Joel directs the Office of Tax Policy Research at the University of Michigan. Both have had top tax policy jobs in Washington. But don’t let their resumes scare you. Taxes in America is a clear, concise, and easy-to-read tour of the U.S. revenue system.

It is written in a simple question-and-answer format, and does a nice job of breaking down complex tax theory into bite-sized understandable chunks.

Taxes in America is no polemic for tax reform, but it is a powerful brief for such an effort. Len and Joel are satisfied to describe how the law works, what taxes do to those who pay them and the economy at large, and how today's revenue system was created. That design will make it a well-thumbed resource in the upcoming tax reform debate.

It isn’t written with the sense of outrage that permeates another of this year’s valuable tax books, Bruce Bartlett’s The Benefit and The Burden. Rather, Taxes in America has a bit of Dragnet in its soul. Like the taciturn LA detective Joe Friday, Len and Joel are interested in just the facts. And like Sgt. Friday, they provide a step-by step tour of how the crime was committed and its consequences, and finally tell us whodunit.

Still, spending a few hours with Taxes in America is a lot like hanging out with your own 1040. You’ll come away stunned at the mess we’ve created for ourselves and convinced that there has to be a better way.

Len and Joel love nothing better than to explode the myths and ideologies that often infect the debate over taxes. For instance, in just a few paragraphs, they fracture the arguments for low rates on capital gains and propose a better alternative (a partial exclusion from income). A few pages later, they explain why married couples may not suffer quite so much from the tax law as the well-trod complaints about the marriage penalty would lead you to believe.

They even recognize the chasm between economic theory and political reality. For instance, after arguing that it makes perfect sense to tax the economic rents of owner-occupied homes, they conclude it will never happen “in part because the concept is impossible to explain to real humans.”

This is not taxes for dummies, and a bit of undergraduate economics might help you follow some sections. And because it is about taxes, it may be inevitable that the book includes questions such as “What is formulary apportionment? Would that be a better option than trying to enforce transfer pricing rules?”

Still, if you find yourself baffled by the politicians’ arguments over tax rates and “loopholes” or about the various forms of tax reforms that are floating around, Taxes in America will help you understand what it is that lawmakers are about to do to you.

Posts and Comments are solely the opinion of the author and not that of the Tax Policy Center, Urban Institute, or Brookings Institution.